Bisichi Share Discussion Threads

[tim000] 23/7/2022 06:53

I've compiled monthly BISI accounts, consistent with my estimates for cashflow for the six months to June, and 12 months to December. The accounts are fairly disaggregated for interim and annual accounts, less so for the equivalent monthly accounts, but do utilise monthly coal prices and exchange rates.

BISI would only have started to notice a pickup in cashflow during April, once they had company accounts for March. Hence the relatively modest dividend announced at end-April when they published the annual financial statements. Cashflow then proceeded at over £3 mn per month in April and May (according to my estimates!), resulting in the 6 June profit warning.

I can't allow for lags between benchmark coal prices and realised prices, as I have no information on how long they are, but they do exist. However, at the moment the futures markets are indicating that prices will peak in July, then start to drop off steadily. This may be revised once the August 10 deadline kicks in for the EU to cease buying Russian coal. BISI cashflow is currently expected to peak during the current quarter at about £3.5 mn per month, then slow to £3 mn per month in Q4.

[tim000] 22/7/2022 10:54

As I wondered, it seems the major South African coal miners are looking to downsize by selling mines to juniors.


hxxps://www.coalage.com/features/coal-remains-vital-to-south-african-economy/

[tim000] 22/7/2022 08:46

The gap between Newcastle and RBCT benchmarks has risen to 23% in 2022 and 25% in 2023, Newcastle being a thermal coal index. BISI and TGA export thermal coal; I don't understand why the latter (and presumably BISI too) are selling at discounts to RBCT when WHC.ASX for example is exporting its thermal coal at the Newcastle benchmark, currently ca $US400/t. Remember TGA averaged ca US$226/t in 2022 H1, less than 60% of WHC's current sales price.

[8gggggggg] 22/7/2022 08:23

Seems like all old rules being torn up. Centrica reopening giant Gas storage plant,K.Kwarteng has asked coal plants to go to stand by. ...Business section D.Telegraph. Thanks to Tim 000and others for informative posts.Dakas

[tim000] 21/7/2022 22:31

Black Wattle ... "produces high-quality export steam coal" (RNS 20/10/2010). And yet in 2021, TGA averaged export prices for its thermal coal of US$104/t, whereas BISI averaged only US$76/t, a 27% discount. TGA has averaged about US$226/t in 2022 H1, a 117% increase on last year. This increase would have been higher still, only a worse coal mix depressed prices somewhat this year. Since the thermal market has tightened considerably, can BISI negotiate prices somewhat closer to those of TGA for its own high quality coal? The interims should tell us.

[tim000] 21/7/2022 22:06

Various Annual Reports have hinted at the importance of the relationship with Vunani for future expansion of BISI’s mining activities. To date, nothing has come of these aspirations. Now that BISI is printing money, and sharing it with Vunani, both parties are heavily incentivised to make concrete progress, and now have the capital to do so. Andrew Austin and others have exploited the majors disinvesting from North Sea oil and gas, I wonder whether similar opportunities apply to South African coalfields? If they do, and Vunani has political clout, the longer term prospects for BISI could be astonishing. Totally overlooked by the market as yet.

[tim000] 21/7/2022 21:55

Thanks! I scour the internet for relevant articles but had missed this one - also accessible via mining weekly. The idea of increasing Transnet and RBCT allocation for Quattro participants makes sense. We are still in the dark about BISI’s allocation, except that a figure of 317k tonnes has been published in the past, and not since updated. The Quattro 4 mn annual limit was not reached last year, with junior miners only taking up 3.5 mn tonnes of their allocation. Maybe they should introduce a trading system whereby participants can buy surplus allocation from peers? Surely BISI would like to increase its allocation, whatever level it is? Sisonke has coped with higher annual production figures in the past. Perhaps Transnet issues prevent railing more coal to RBCT?

[e43] 21/7/2022 21:25

Quite abit of interesting info regarding Transnet on the railwaysafrica.com website including a snippet that emerging miners are to be given a larger tonnage allocation on the line going forward.

[tim000] 19/7/2022 15:06

I've been doing some sensitivity analysis wrt the sensitivity of BISI's coalmining profits to variations in the domestic and export percentage discounts to the API-4 RBCT benchmark prices. Respective outturn discounts in 2021 were 75% and 39%. My central projections assume discounts of 82.5% and 30% in 2022 H1 (the 82.5% domestic sales discount is roughly break even). That yields very substantial profits, as reported by the Board. However, reasonable assumptions that are worse than these numbers don't make a massive difference to BISI's profitability. That's because a high aggregate deduction rate acts as a dampener to different assumptions for coal prices, discount percentages etc. That is, high deduction rates prevent profits going through the roof, but also mean that lower profits attract much lower deductions, so BISI's cashflow is not harmed excessively. I estimate the marginal deduction rate is about 41.9%, which includes royalties, corporate income taxes and the BW shareholding of Vunani.

[tim000] 19/7/2022 14:36

ex-UK listed Universal Coal (now owned by ASX-listed Terracom) has thermal coal mines in the Witbank coalfields near Black Wattle in Middelburg. Scroll down the page to see a map of the UC coalfields. UC exports principally via RBCT, but also trucks coal to Maputo in Mozambique to the east (250 miles from Middelburg), and Durban to the SE (nearly 370 miles from Middelburg). UC has been trucking coal to port recently, to overcome Transnet problems. Costs are said to be about US$60-80/t higher than railing to RBCT, but at current international prices that's still economic. Trucking coal to Maputo and Durban avoids export limits imposed by the owners of RBCT.

Note trucking is not feasible for the larger miners such as TGA (road capacity is inadequate), but is an option for juniors such as BISI.


hxxps://universalcoal.com/

[montyhedge] 19/7/2022 14:20

Germany biggest user of coal in Europe, if Nord Stream 1 does not come back on this Thursday, one analyst said Germany won't panic until Monday.The price of Newcastle Coal would go to $500 profits for coal miners would be superb.

[tim000] 19/7/2022 13:42

Transnet gets US$1.5 bn funding for maintenance work and refinancing existing debt.

[tim000] 18/7/2022 19:20

Me too, coal stocks should prove a fantastic dividend payer for many years to come. I’ve added TER to my Aussie holdings of WHC, YAL, NHC, AHQ and CKA.

[andydaf] 18/7/2022 19:05

Of course i am hoping for the best!as i have said before though my tactic with these poorly valued coal assets and even some of my oil and gas companies is to forget meaningful share price appreciation and instead i am looking to recieve my money back in short order through dividends and then proceed to reap the benefits for the next decade.Coal and oil and gas are not finished yet by a long shot.GLA

[tim000] 18/7/2022 17:11

Don’t set your hopes too high on cashflow numbers. You’re right of course that they could be as high as you estimate, but as you say there is a lot of uncertainty on domestic pricing. And also a lot of deductions too: royalties, corporate tax and payments to the junior partner, Vunani.

I estimate EBITDA for WHC of A$5.4 bn in calendar 2022, compared with their mkt cap of A$5.6bn.

[andydaf] 18/7/2022 16:41

Only a few weeks to wait for the interims now.I am expecting FCF to be around 15million and that might well be short depending on what Bisichi have managed to achieve pricewise on the domestic sales.If they have managed to make just 15dollars a ton on the domestic sales that would be another $5 million in profit.I bought some WHC mostly due to their balance sheet and also circa 20%coking coal.WHC seems to trade on a p/e of three and a possible dividend of 20%.By my maths Bisichi trades a multiple of less than one.If europe and the uk suffer a serious energy crunch in the winter as i believe they could having commodities priced in dollars could be a massive bonus should the pound and europe collapse.As always GLA and DYOR

[tim000] 18/7/2022 09:37

Whitehaven (WHC.ASX) announced its Q2 results today. Whitehaven benchmark their achieved prices for sales of thermal coal against Newcastle thermal coal prices, the latter averaging US$377/t in Q2 and US$320/t in 2022 H1. The discount to benchmark shrunk from 15% in 2021 H2 to just 2% in 2022 Q2. Moreover, achieved prices inherently lag a rising benchmark due to timing differences related to shipping. So the tightness of the global thermal market had effectively eliminated the discount altogether. Bodes well for BISI export pricing this year.

[tim000] 16/7/2022 09:13

It follows that, should the BISI share price increase by say £1 on news, the fair value increase in the LAS share price is 5.2p. Anything less is an arbitrage opportunity.

[tim000] 16/7/2022 09:03

Heller family members own 56% of the LAS share capital, but only Sir Michael has a notifiable interest! Nor are they deemed to be acting as a concert party. There are a lot of Hellers about.

Ignoring BISI altogether, LAS's net book value is currently 30% higher than its current mkt value. The true mkt value of LAS's BISI shares might be around £40 mn?? That's 47p/s. That's the upside LAS shareholders are looking at. A useful stat is that for each 19.25 LAS shares owned, one is indirectly owning exactly 1 BISI share.

[bisiboy] 15/7/2022 22:29

i have been adding LAS as well although i feel very sure that they will not make a bid as with seperate companies the family can bag more in the way of director fees and bonuses.
if anything BISI should buy LAP

[tim000] 15/7/2022 13:40

It’s not that I dismiss climate change (although a lot of the claims are factually wrong, eg forest fires are reducing, not increasing.) It’s whether humans and carbon dioxide levels are in any way responsible. The research that I see is that climate change is normal, unrelated to carbon dioxide and that carbon dioxide levels are trending downwards when looking at the longest time series.

[robizm] 15/7/2022 12:24

UK temperature may be 39c on Tuesday and that is way higher than in 1976 which was the year of the drought. We can all dismiss climate change as rubbish but these high record breaking summers are every few years now where they used to be every 30 years. I am not a climate nut and own shares in Bisi and TGA.

[8gggggggg] 15/7/2022 08:33

From my research LAP have only one problem, refinancing £14.5 m loan in next 3 months.I gather BISI shareholding is not charged. ...yet .... So I agree LAP. is a cheap and hedged way into BISI.Dakas

[tim000] 14/7/2022 21:49

I don’t know how likely it is, but we’ve mentioned before the risk of LAP making a takeover bid for BISI, and shareholders accepting too low a bid. So I’ve been buying more LAP today. Were BISI to hit £10, that would be worth about £41.5 mn to LAP, or 2.5x its current mkt cap (notwithstanding its substantial property assets). Something of an insurance policy.